Norton Way’s focus on customer service and investment in facilities has allowed it to profitably build fleet business.
Once the vehicle choice list has been agreed, the discounts negotiated and the leasing provider signed up, it usually falls to the franchised dealer to fulfil the fleet contract, ordering and handing over the vehicles, maintaining them in-life and sometimes collecting them at end of lease.
Their role cannot be under-estimated: a good dealer speeds up supply, prioritises SMR, helps the fleet minimise downtime and keeps drivers satisfied. Unfortunately, many do not take fleet seriously – some actively shun it, despite fleet accounting for more than half of new car sales.
Not so at Norton Way. It has long recognised fleet’s importance and has invested heavily in its showrooms and in workshop and pre-delivery inspection (PDI) facilities to ensure it offers the best possible service to its manufacturer partners, leasing customers, fleets and drivers.
Fleet News: Many dealers do not want to get too deeply involved in fleet. Why does it attract Norton Way?
Richard Siney: Around 50-70% of the UK new car market is fleet – why wouldn’t you want to be involved in that? You deal with professional buyers from fleet manager and leasing company perspectives and we like a challenge. We like to understand and respond to what’s important to the fleet. Fleet is leading edge; anything important – CO2, Euro NCAP, fuel rates – fleets are early adopters. They are a good barometer for where the whole motor trade is going.
FN: But there are often complaints that fleet is nowhere near as profitable as retail…
RS: It’s a different sales channel and a different mindset. It needs a lot of cash and there’s a lot of debt involved (from managing the volume stock turn). Investment in the right facilities is needed to do it properly, but if you get it right, it’s a profitable part of the motor trade.
FN: How do you manage the expectations of leasing companies, fleets and company car drivers, each of which has different needs?
RS: Eighty per cent of our business is through leasing companies, the rest via fleet managers. But in most cases we deal directly with the end user. We are looking for the endorsement of both being happy. It’s about managing expectations. It’s important to listen and understand that, for the driver, it’s a new vehicle every three or four years so it’s an exciting time for them. But it’s also a business vehicle so you have to be efficient and professional. And with leasing companies, you have to reflect their SLAs and their business values.
FN: What changes have you seen since the recession?
RS: At a macro-economic level, we saw more fleet decisions were cost-based. We saw an element of down- or right-sizing. Also CO2, mpg and insurance groupings were driven down, but by cost, not by a desire to be green. Expectations are rising. As an industry, we are in a position whereby end users expect the highest possible retail standards at a fleet price. That can be tricky. But we are seeing increases in fleet business – it’s buoyant.
FN: What would you change about the fleet market?
RS: The cost of logistics has caused significant margin erosion. Some is due to fuel prices, some to tacho hours and other legislation. It takes a larger part of our margin than ever before and that drives a regional mentality. The market still wants a national network, but we have to help our customers to manage a north and south supplier to keep the geographical coverage.
The return of used cars also needs managing in a different way. There is expectation and pressure to collect and move to a third party, but the cost base should sit somewhere else.
We have also seen funders become more enthusiastic on charging for damage. A car might be collected from a dealer by an auction house two days and if they pick up on additional damage it can’t be charged to the fleet because the inspection report has already been signed off. It comes down to the skills of our handover person; they have to be a used car appraiser as well.
FN: Are SLAs getting tougher?
RS: We enjoy being measured by leasing companies and SLAs are the right thing to have – they are built into our business plans and shape our strategy. The core of SLAs is very similar, but we are seeing a more realistic view on acceptable mileage on handover. It went from 200 miles to 150 to 100 to 50, which meant a transporter handover.
However, the recession helped a sanity check – if a vehicle is on a 60,000-mile contract, does it matter if it has 150 miles on handover? Leasing companies have asked their customers what’s important and found that delivery mileage isn’t a concern.
FN: Can fleets do anything to make your job easier?
RS: We don’t want it to be easier – we want fleets to be as demanding as they want. They deserve to be working with somebody that wants to meet their demands.
FN: What changes have you made to your business to improve the service you offer fleets and leasing firms?
RS: We moved fleet out of our retail workshops 15 years ago to allow our retail sites to maximise their profitability. We opened our fleet PDI centre seven years ago. It improves the aftersales service and speeds up the process. Every car here is a sold unit. We have up to 800 on site and our aim is to turn them as quickly as possible. We PDI cars when they arrive, typically within 24 hours. We pre-order parts so it doesn’t hold up delivery. We also do livery and modifying, such as ply-lining and air vents.
FN: How has the process changed since you opened the PDI centre?
RS: The old way took seven to 10 days to PDI because we were juggling retail hours in the workshop and trying to maximise the profit by charging a retail job versus an internal fleet job. Fleet is a specific route, but you have to invest in the right people, processes and facilities.
FN: You are able to handle more than 100 vehicles a week; how do you maintain quality control?
RS: It is important that every part of the process is quality checked. When the car arrives on the transporter, the technicians check them. Then the valeters check them before the cars go out. The final link is the customer liaison officers – the drivers who do the on-delivery to the customer. They do a final quality check before they hand it over.
FN: You are at the coalface in terms of delivering salary sacrifice – what’s your view?
RS: Some manufacturers are embracing it more than others, but we have seen substantial growth in salary sacrifice, predominantly for B-sector and low-CO2 cars, both in the public and private sector. We find very little salary sacrifice is replacing new car sales business – they would’ve bought nearly new or used vehicles without salary sacrifice. The vast majority are first-time salary sacrifice takers, but I think retention will be good and it’s here to stay as long as legislation doesn’t change.
Fleet remains a business of marginal returns that requires high degrees of efficiency to make it work for dealers.
It’s a balancing act, according to Siney, although the sales target-related reasons for doing it have largely gone, which has removed some of the stress of taking a wholly price-led approach to corporate business.
“People that are good at fleet now have their cost base under control and an effective process in place,” he says.
It’s what makes Norton Way’s brownfield PDI site at Arlesey vital to its success.
Overriding the dealer group’s fleet focus is a simple attitude, adds Siney: “Our philosophy is that every vehicle is the most important vehicle that we’ll ever do.”